RWL’s dedicated insolvency, restructuring and business rescue team focuses on minimising loss, maximising returns and assisting clients throughout South Africa to proactively manage financial risk and exposure. When insolvency is inevitable, we have the expertise to develop and implement effective recovery strategies for viable business activities, and to maximise returns for creditors.
This is one of the largest departments in the firm. We act on behalf of trustees, liquidators, and leading South African Banks. Services include voluntary and compulsory sequestrations, shareholders and creditor voluntary winding ups, compulsory winding up applications, insolvency related litigation and interrogations.
Chapter Six of the Companies Act of 2008 allows for a Company to be placed under business rescue if the Company is financially distressed and there is a reasonable prospect of rescuing the Company. Business rescue is a formal process where a Company is either placed under rescue in terms of section 129 of the Companies Act of 2008 through filing a resolution at the Company and Intellectual Property Commission (“CIPC”) or in terms of section 131 of the Companies Act by obtaining a Court order to place the Company under business rescue.
In such circumstances, we conduct a due diligence on the Company which consist of both legal and financial due diligence.
The due diligence is followed by a business rescue assessment that determines whether the implementation of restructuring activities will result in a Company benefiting from the rescue plan.
The assessment also determines whether business rescue could result in a better return for Creditors than immediate liquidation should the Company be wound down (quasi liquidation) within the parameters of business rescue.
The assessment is usually done before filing for business rescue plan however, in instances where the Company is placed under severe pressure by its Creditors the Company will be placed under business rescue and the assessment done before the first Creditors meeting, where the practitioner will inform the Creditors whether there is a reasonable prospect of rescuing the business.
A rescue plan is then drafted and voted on by Creditors at a meeting where they consider the adoption and implementation of the plan.
Section 155 Compromise with Creditors
A Company may compromise its creditors irrespective of whether it is financially distressed or not unless it’s engaged in business rescue proceedings. We enter into a section 155 scheme of arrangements or compromise with the Company and its creditors, the scheme is then considered and voted on in terms of section 155(6) of the Companies Act of 2008. We then institute an application to Court in terms of section 155(7) (a) for an order granting the proposal. However, this is not recommended as no protection is afforded in terms of section 133 of the Companies Act.